Views from the Working Capital Round Table 2018

A few months ago, I attended the Working Capital Round Table at the EY offices in Atlanta – a small and collaborative conference hosted in partnership with us, Taulia. In the room were a group of industry experts, ranging from treasurers to supply chain leaders and advisors with years of experience in working capital improvement strategies.

 

The companies present ranged from public to private, with leaders from industries such as packaging, manufacturing, transportation, automotive and electronics to name a few. The revenues of these businesses also ranged from $1.5bn to $25bn. So as you would expect, there were lots of interesting conversations and debates around working capital.

Here’s a rundown of the key discussion points at the round table.

You can release more cash than you think

  • Did you know that the majority of businesses can release between 10-20% of their working capital figure while attaining cost and service goals? EY presented us with this eye-opening data which shows the average amount that businesses can release in order to fund projects, support infrastructure, and invest in research and development.

The results aren’t always as they seem

  • Year end and Q4 results aren’t always indicative of a business’s revenue position. In many cases, Q4 improvements such as lower days sales outstanding (DSO) and longer day payable outstanding (DPO) are quarter-specific actions that are given back in Q1. So when looking at your working capital results, think about the bigger picture.

Peer performance comparison is super important

  • Cash conversion cycles (CCC) are impacted in various ways depending on whether businesses are small or large, or located in EU or USA. As such, you need to look at key metrics DIO, DSO and DPO of close peers to understand what a good position is and how you can create a solid working capital optimization strategy for your business.

It’s wise to ask an expert for their advice

  • Sure, like I mentioned in the point above, comparing peer performance is crucial. However, it’s equally important to work with an expert in their field to help you understand how firm-specific strategies – like accounting policies, strength in value chain and geographical footprint – will impact your own working capital goals.

It goes without saying the round table was dynamic, instructive and informative – and many of the attendees (myself included, that’s for sure) commented on how we all had something to learn from the debates and discussions. While it was clear that every person in the room understood that all businesses have working capital needs, it was clearer still that there’s a long way to go in creating a world where every business thrives through liberated cash flows.

If you’d like to have a chat about how Taulia can help you create a working capital strategy that will free up cash for every business in the supply chain, contact me at swinda.salazar@taulia.com.